Fed Small Business Loan Support Program Extended for 3 Months

CPFF and Other Less Used Services to Be Discontinued

[Image source= EPA Yonhap News]

[Asia Economy Reporter Byunghee Park] The U.S. central bank, the Federal Reserve (Fed), announced on the 8th that it will extend the expiration of the emergency loan support program for small and medium-sized enterprises, the Paycheck Protection Program (PPP), by three months.

The PPP is a support program introduced by the Fed in March last year after the outbreak of the COVID-19 pandemic, and was scheduled to expire at the end of this month. With the Fed's extension decision, the PPP will be maintained until June 30. Banks were able to lend to small and medium-sized enterprises through the PPP and then use these loans as collateral for financial transactions with the Fed.

On the other hand, the Fed decided to terminate three other liquidity support programs, which were introduced to increase lending capacity in the financial sector, as scheduled at the end of this month. The programs to be terminated are the Commercial Paper Funding Facility (CPFF), the Money Market Mutual Fund Liquidity Facility (MMMFLF), and the Primary Dealer Credit Facility (PDCF).

The Fed explained that the reason for termination was due to low usage of these programs in recent months. When COVID-19 spread, the Fed introduced CPFF and others consecutively in March last year to prevent a credit crunch. Bloomberg described the Fed's termination of the three liquidity support programs as a sign that the financial market is stabilizing.

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